Vinyl led record label and cutting studio, producing previously unreleased archive & new recordings.
Business overview
| Location | London, United Kingdom |
|---|---|
| Social media | |
| Website | www.gearboxrecords.com |
| Sectors | Entertainment Non-Digital B2C |
| Company number | 8877667 |
| Incorporation date | 5 Feb 2014 |
Idea
Introduction
We are looking to raise £360,000 of funding, of which £205,000 has already been invested in a preliminary round raised at the end of March 2015.
The last 6 years has seen a rapid growth in vinyl sales, outpacing that of both CDs and MP3s.
Gearbox Records is riding this wave, having already achieved:
- 16x growth rate (annualised)
- £100,000 turnover (annualised)
Led by a former Ernst & Young Entrepreneur of the Year finalist and a music industry veteran, Gearbox Records offers:
- High quality vinyl and digital products direct to consumer, direct to retailers and via distributors in difficult territories.
- Specialist operation and skills to other labels and artists.
- Owning and licencing rights to music new and old.
- Designing a new, multi function turntable with a small footprint.
- Curation of vinyl in hotels and private members clubs.
Intended impact
This is as much a philosophy as a product set. Music has become much more available. With this "all you can eat" approach, we are suffering from indigestion! How do you grab people's attention in such a noisy market place other than shouting louder by spending ever more on marketing? We say focus on the art of sound and aesthetic. With vinyl's engaging artwork and excellent sonic quality, it's time for people to listen to and appreciate the music, not just hear it and forget; to put the art back into music by making it sound and look good. With vinyl, people tend to listen the whole way through an album either alone or together with others. They engage with and discuss the music and artwork rather than having it in the background as a sound track to whatever else they might be doing at the time. It's a true social medium.
Music is not a commodity, and we see people already responding to this when you look at the statistics over the last 6 years showing the hockey stick growth in vinyl sales. The trend in production techniques are designed to be as loud as possible in order to compete on the radio, which squeezes all the dynamics out of the music. We feel that this makes it tiring to listen to over extended periods, and attention spans seem to be dropping when people listen to these recordings. The Gearbox product counters this through sensitive production using excellent techniques, allowing vinyl and high resolution digital buyers to appreciate and enjoy listening to the music again.
Our methods, service and products are enhancing all these good outcomes further. According to articles on us in the FT, Independent, Hifi World, Record Collector and many more, we are having a significant impact on listeners behaviour.
Substantial accomplishments to date
Mark Ronson and Michael Chabon in the Gearbox Records studio, just prior to the release of the number one hit single, Uptown Funk.
Started as a hobby business for musician and award winning entrepreneur Darrel Sheinman (Times Techtrack 100 four times; Ernst & Young Entrepreneur of the Year finalist 2001), it became a full time occupation in 2012 when music industry veteran Adam Sieff joined. With a turnover of £100,000 annualised since turning the business to a full time profession in 2012, it's the 16x annualised growth rate with little marketing which is note worthy; all from selling records and 3rd party mastering. The growth continues. Darrel has invested over £250,000 in building an amazing studio and funding working capital needs through preference shares and lending the company money. He now seeks funding to capitalise on this and the current zeitgeist.
A significant partner for the hotel vinyl curation business has been identified.
Designs for the turntable have been submitted to its lawyers for IP protection prior to approaching manufacturers and well known potential distribution partners.
Monetisation strategy
Vinyl & hi-resolution digital record label
High quality audiophile archive jazz, frontline electronic jazz and alternative music on vinyl records and hi-resolution digital files. These are sold through direct online sales, selected retail outlets globally, streaming platforms and distributors in difficult territories.
Model: Ave. Cost of Goods Sold (COGS): £4. Dealer price: £15. Retail/direct sale price: £25. Target sales build, post investment of 1,500 records per month from current 250 per month.
Curation
Hotel and private club listening salons containing a library of curated vinyl, hi-end hi-fi and top interior design collaboration, managed and built by Gearbox on a fee basis. Model: Target of £15,000 per annum curation fee & contributor to 1,500 per month vinyl sales.
Gearbox 33
A new way to sell records: a pop-up retail outlet offering a carefully selected small number of records on a rotating monthly basis from Gearbox’s own label and other labels, as curated by leading genre specific DJ's and tastemakers. Model: Targeting contribution of 1,500 per month vinyl sales.
Mastering, cutting, vinyl consultancy and listening room
Fee based mastering, cutting & playback on Gearbox proprietary equipment to 3rd parties. Additional service includes hand holding labels, artists and producers through the vinyl production process, from recording studio to final press. Model: £160 per hour max capacity 80 hours per month.
Hi-Fi sales
Audio Note and Rega distributor via bespoke studio. Model: Target of 25% of sales
Aim to prototype and patent a ground breaking turntable in order to offer licence to large scale distributors to joint manufacture and sell to the mass market. Expected price point £250 on £100 manufacturing price, with a target of selling 2500 units year 2 rising to 5000 year 3.
Use of proceeds
To scale the existing core elements of vinyl and digital product sales to yield greater revenue from existing catalogue; acquire more catalogue; seed develop the new product lines; to hire admin, sales and engineering personnel and adjust existing payroll in line with the market. Current pre-money annualised T/O growth of 16x (£89,000 Cal 2012; £149,000 1st Jan 2013 to 30th June 2014).
A shareholder in the Company has preference shares which are entitled to an annual preferential dividend equal to 4% of the value of their initial investment.
Market
Target market
he vinyl album LP continued its unlikely comeback in 2013, with sales in the United States reaching 6 million units. As opposed to CD sales which declined 14.5% and digital album sales which stagnated, LP sales grew by 32% from 4.55 million units in 2012. Overall album sales suffered an 8.4% decline, slumping to 289.4 million from 316 million units in 2012. Our target market is these new buyers in US and the rest of the world. Anecdotal evidence suggests that young music fans represent a sizeable proportion of this market. Although still predominantly male, there is also evidence that more women are buying too. We will therefore develop our campaigns to target the younger mixed gender market, as well as affluent buyers in their from 40 to 65. Our genres of music are jazz, electronica and folk, so we will target retailers and distribution specialising in this music.
The target market for turntables in UK turned in 2010 too. According to What Hifi consumer electronics figures, 77,400 turntables were sold in that year to May (a 11% increase). That compares to 41,400 CD players. This trend continues to the present day.
However, the CD player market remains more lucrative - the average price has risen 31% to £386 (with a 57% rise in sales for £1000+ players), while the average selling price of a turntable has fallen 10% to just £122. We believe that this shows the real popularity area: budget and USB decks, which is exactly the market that Gearbox's new turntable will be designed to address. However, it will include some higher quality components, especially at the cartridge end, where cheaper decks can ruin vinyl.
On the vinyl consulting side, we continue to target products and other record labels, as well as direct to artists.
Music curation will target high end hotels which attract creative types. There are several hotels already embracing the concept for movie screening. These will be our initial addressable market.
Characteristics of target market
With the current trend for growth in vinyl (15%-18% year on year since 2008 source BPI and Nielsen), Gearbox has started to release high quality vinyl produce in an "artisan" all analogue manner. Quality control is exceptional, and music for the archive catalogue is chosen for its historic integrity, whilst living artists are chosen for originality and ability to play live in the studio. There is much evidence to suggest this return to real music making is in demand.
With the market having been focussed on digital production, vinyl production expertise is now lacking. We help other labels, producers and artists through the vinyl production process, using our cutting facility and our relationships with the best pressing plants. We also help with artwork and design. Gearbox, through this vinyl consulting service is addressing this new market.
Vinyl sales represent the fastest growing part of the market since 2007 as other areas are either stagnating or in rapid decline.
Marketing strategy
Joint venture partnerships with jazz clubs would give us unprecedented access to mailing lists who want our core jazz vinyl product. We have already signed such a deal with Ronnie Scott's jazz club, and are now in talks with Cafe Monmarte in Copenhagen.
We have a global online sales platform already active to reach end user retail customers. We also sell direct on Amazon and Music Glue.
We have a programme of direct sales to record shops and dealers around the world. To this end, through face to face visits in country, we have created a Gearbox dealer network in UK, Finland, Norway, Denmark, USA, Japan, Greece & Germany. We use distributors only for France, Spain and Australia. We intend to hire a full time sales person to maintain and develop new relationships around the world.
Our hifi sales reach is reactive at the moment. We are distributors of Rega turntables, and we will look to develop this area with the addition of sales personnel.
For vinyl consultancy and mastering/cutting, again we are currently reactive. However, this is something we are looking to change with the new funding enabling us to hire a couple of high-quality engineers.. We also aim to hire a 2nd engineer in support.
The curation business is being marketed directly by the Founder, but a partnership with Classic Album Sunday's is being fostered.
Competition strategy
Due to the difficulty in finding quality vintage hardware due to scarcity, and the cost of restoration, we believe there are high barriers to entry in creating a studio such as Gearbox's. The Gearbox studio can offer an all analogue signal chain using "fixed pitch", requiring no digital converters to create a sonic preview signal to tell the cutting lathe when louder track sections are coming. This may sound like a technicality until it's understood that much of the market is aware of some vinyl being cut from CD or worse still Mp3 sources. Whilst some improvements on the source quality might be noticed from this technique, we believe sophisticated consumers want an all analogue chain to really appreciate their vinyl, otherwise it may engender a "what's the point" attitude. Gearbox is actively marketing this technical aspect to distance itself from cheaper mastering techniques when both offering its vinyl consultancy service and when selling its own releases.
Technical descriptor stickers are placed on the front of each release to send the message at point of sale, and face to face sales are made direct to retailers. Public events are often held in the studio to showcase the sound.
For vinyl consulting and mastering, customers come for the engineer and lead times to finished product. As mentioned above, Gearbox looking to hire a leading "go to" engineer, and has strong relationships with its pressing plants to be able to offer short lead times, whilst maintaining the highest level of quality control (QC). Darrel Sheinman is part of a 3 man team writing the vinyl mastering QC document for the Music Producers Guild.
Gearbox continues to acquire the finest equipment and record and licence the best source material, using a blend of old and new to create the finest sound. We believe that this adherence to standards will keep the company ahead of competition.
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